Uncommon Wisdom

Nov 5 2009   2:08PM GMT

Cisco’s earnings show customers’ releasing 2009 project budgets

Tom Nolle Tom Nolle Profile: Tom Nolle

Cisco saw both revenues and profits fall, but both also beat analyst expectations. Chambers was upbeat about the next two quarters, pumping estimates ahead of current guidance. Order growth in the U.S. was flat, and other geographies were down.Both enterprise and service provider business lines were down.

The Cisco CEO also talked about the opportunity he sees for Cisco and about Cisco’s ability to bring off a host of acquisitions, ventures and new offerings that combine to create a fairly radical shift in company direction. Chambers says orders are picking up and suggests this is a result of the “we-can’t-wait-any-more” mindset. Here we have to disagree; buyers could in fact wait for quite a while longer.

Cisco’s results are primarily the result of the release of 2009 budget money we reported in the spring. Our surveys showed that slightly more money was spent in the last quarter, but most of the line budgets are now spent (only 3% remains for Q4) and further spending growth will rely on Cisco getting a piece of project budgets. That’s likely to happen, but our research shows that buyers often juggle project spending between IT and networking gear in Q4. So it’s not possible to predict just what Cisco will get. We think that the next 2 quarters could prove more challenging depending on retail behavior in this quarter.

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